When it comes to Michigan political campaign financing, violations of the law seem to be unevenly applied by Secretary of State Jocelyn Benson. If you’re a Republican, or connected to conservative or GOP-related campaigns, you’re likely to get the hammer for any infraction. If you’re a Democrat or a ‘progressive’ campaign to get on the ballot, not so much.
The only hope for correction of this situation appears to lie with Attorney General Dana Nessel, like Benson a Democrat. Plus, Nessel has a chance to do a lot more than deal with Benson’s double standards.
Nessel has a chance to crack down on a new scheme of hiding the true identity of donors to a ballot question committee that made its appearance in Michigan in the 2022 election cycle. It’s a perfect opportunity for a Democratic Attorney General whose party has railed against the use of ‘dark money’ to win elections. Nessel could strike a huge blow right now to cripple the practice of ‘dark money.’ The ball is in her court. She can make something happen if she wants to, but she’s already waited 15 months without making a move.
What is this ‘new scheme,” anyway?
IT INVOLVES USING LIMITED LIABILITY COMPANIES (LLCs) TO REPLACE “501 C 4s” AS THE DARK MONEY VEHICLE OF CHOICE IN MICHIGAN.
Under the new scheme, someone creates on paper an LLC (limited liability company). Donors who want to financially support a Ballot Question Committee (BQC), but do not want their names disclosed on a campaign finance report simply write a check to this LLC. Then that check and others is deposited in the LLC’s bank account The LLC, in turn, writes a check to the BQC. It shows up on the BQC’s campaign finance report as a contribution received from the LLC, not the true donor.
In five simple steps, anyone can be off and running their own political money laundering operation. Here’s how:
Step 1: Choose an LLC name or acronym and register it with the Michigan Department of Licensing and Regulatory Affairs (LARA).
Step 2: Choose a registered agent.
Step 3: Prepare an LLC operating agreement.
Step 4: File with LARA’s Bureau of Corporations, Securities and Commercial Licensing, your LLC’s articles of organization.
Step 5: Get an employer ID number (EIN) from the IRS and open a checking account at a bank or other financial institution.
Anyone can retain a law firm to do all this, or he or she can do this on the cheap by obtaining from LEGALZOOM their free LLC package of forms and documents to file with a payment of state filing fees to put their LLC in operation. LEGALZOOM offers a premium package for $299 plus the payment of state filing fees and, as with TURBOTAX, that fee includes consultation with a LEGALZOOM attorney.
Sound far-fetched?
Grosse Pointe Park businesswoman Shery Cotton, co-founder of the insurance company Meridian Health Plan, had a law firm create a limited liability company for her called RFFW. That acronym likely stands for Reproductive Freedom For Women (RFFW), but an acronym was sufficient.
RFFW, the LLC, was filed with the State of Michigan on July 14, 2022. RFFW sent $1 million to Reproductive Freedom for All (RFFA), the ballot question committee registered with the Bureau of Elections supporting Proposal 3. The $1 million was reported by RFFA as a direct contribution coming from RFFW.
On their November 8, 2022, general election ballots, voters approved Proposal 3, enshrining abortion rights in the Michigan Constitution.
During the campaign, after $1 million was disclosed coming from an LLC with an acronym for its name, a campaign finance complaint was filed with the Bureau of Elections. Eight months later, RFFW agreed to sign a conciliation agreement with the Secretary of State’s office revealing the source of the mystery money. Shery Cotton was identified as the true donor, giving the $1 million to RFFW that was then contributed to RFFA.
The conciliation agreement required RFFW to file with the Bureau of Elections a Statement of Organization registering RFFW, itself, as a ballot question committee. RFFW was also required on its campaign finance report to disclose that Shery Cotton, on July 18, 2022, made a $1 million contribution to RFFW. The campaign finance report discloses that RFFW contributed $1 million to the ballot question committee, Reproductive Freedom for All (RFFA).
The Bureau of Elections assessed RFFW only $1,300 in late filing fees accumulated for their late statement of organization filing and all their late campaign finance statements. Was a fine of $1 million for laundering $1 million through RFFW to RFFA ever on the table?
Was this a sweet-heart deal? You decide.
Now let’s look at another case. The Bureau of Elections made a determination back in October, 2021, that there was reason to believe that Michigan Citizens for Fiscal Responsibility (MCFR), a 501 C 4 organization, violated the Michigan Campaign Finance Act (MCFA) for laundering $1.78 million from 44 contributors through MCFR and contributing that same amount to Unlock Michigan, a ballot question committee that was organized to repeal, through a statutory initiative, the 1945 Gubernatorial Emergency Powers Act during the height of the 2020-2021 Covid-19 pandemic.
Unlock Michigan reported receiving $1.78 million made in 10 separate contributions over 2020 coming from MCFR. The conciliation agreement that was offered to MCFR would have required MCFR to pay $1.78 million to the State of Michigan for their illegal contributions to Unlock Michigan. Unsurprisingly, MCFR rejected this offer.
Another 501 C 4 organization, Michigan! My Michigan! (MMM), also had a campaign finance complaint filed against it in April, 2021. This complaint alleged that MMM laundered $550,000 from 34 contributors made in five separate contributions to Unlock Michigan. After finding there was reason to believe a violation of the MCFA occurred, MMM was offered a conciliation agreement which would have required MMM to pay $550,000 to the State of Michigan, an amount equal to their illegal contributions to Unlock Michigan. MMM rejected this offer.
Because MCFR and MMM both refused to sign conciliation agreements and pay fines equal to the amount of their illegal contributions, the Secretary of State on June 3, 2022, made criminal referrals of both organizations to Attorney General Dana Nessel. It has been 15 months since those criminal referrals were made to the Attorney General.
At this stage, Michigan Citizens for Fiscal Responsibility and each of its 44 contributors whose names were redacted on the 2020 IRS Form 990 could all be charged with a criminal conspiracy, a five-year felony to violate Section 41 (3) of the MCFA. So, too, could Michigan! My Michigan and each of its 34 contributors whose names were also redacted on their 2020 IRS Form 990 be charged. This section of the law prohibits contributions from being made by a person in the name of another. Without a conspiracy charge, however, a violation of Section 41 (3) is only a misdemeanor that is punishable by a fine of no more than $10,000.
Criminal conspiracy is where two or more persons agree to do a legal act in an illegal manner. It was the basis for the criminal prosecution of aides to Congressman Thad McCotter (R-Livonia), who in 2012 illegally photocopied signatures from McCotter’s 2010 nominating petitions onto McCotter’s 2012 nominating petitions. Then-Secretary of State Ruth Johnson, like McCotter a Republican (Johnson beat Benson for SoS in the 2010 election), rejected the fraudulent petitions and issued the ‘death sentence’ for an incumbent Congressman — she did not allow McCotter’s name to appear on the August 2012 primary ballot, effectively ending his political career. A unanimous Michigan Supreme Court in People v Seewald (2016) upheld the criminal conspiracy charges.
At any time between October 2021, when the Bureau of Elections made the determination that there was reason to believe a violation of the MCFA occurred, and June 3, 2022, when the criminal referral was made to the Attorney General, did Secretary of State Jocelyn Benson’s Department ever offer MCFR and MMM a similar settlement that they reached with RFFW? No. Nothing in the rejected conciliation agreements suggests a RFFW-like offer was on the table.
Retired attorney and campaign finance expert Bob LaBrant argues that Attorney General Nessel should use the criminal referral made to her and go back to MCFR and MMM and offer them the same settlement the Secretary of State offered to RFFW:
1. Register itself as a ballot question committee.
2. Disclose all the names addresses, dates, and amounts of their mystery contributors.
3. Pay all late filing fees for their statement of organization and all the required campaign finance statements.
That’s the carrot.
If that generous settlement offer is refused, her office could then use the stick, says LaBrant.
Nessel and her OAG could either bring felony criminal conspiracy charges or misdemeanor charges for violation of Section 41 (3) of the MCFA against MCFR and MMM and each of their collective 78 mystery contributors, which are most likely major companies and associations in Michigan whose lobbyists could not say “No” to then-state Senate Majority Leader (Republican Mike Shirkey) but wanted to hide their funding of Unlock Michigan from the governor.
Obviously, a criminal conspiracy trial with as many as 80 defendants would make the upcoming Trump Fulton County, Georgia, RICO trial with 19 defendants look like child’s play.
The most important outcome of the criminal referral to the Attorney General should be disclosure, transparency, and accountability.
If the Attorney General, through a court ordered investigative subpoena, obtains from MCFR and MMM a list of their 2020 contributors by name, address, date, and amount from an unredacted 2020 IRS Form 990 or bank records, the public interest would be served even without criminal prosecution.
The Attorney General can publish the results of her investigation, listing the source of the dark money made to those two 501 C 4 organizations. Shareholders and the company’s board of directors and association members and the association’s board of directors would be armed with information from that report to hold their management and staff accountable for this money laundering. Those 78 contributors to MCFR and MMM would be historically recorded and metaphorically etched onto a ‘Dark Money Wall of Shame’ along with the political consultants and public officials who concocted this scheme.
LaBrant believes Michigan has tolerated a culture of dark money for too long. The Michigan Campaign Finance Act, when it was enacted in the aftermath of the Watergate scandal in December, 1976, was based on the core principle that public disclosure is the best disinfectant.
It’s difficult to contend that the public does not deserve to know the source of money in the political process. Only when voters know the true source can they make informed decisions. Hiding the true identities of donors from the public, using vehicles like 501 C’s or LLC’s, should end. But has there been any talk that dark money reform should be on the agenda for legislative action this session in time for the 2024 elections?
No.
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Superb research and analysis; best and most meaningful piece about this issue in this state I can remember,
Exactly.
Meridian has contractual relations with the State of Michigan to administer Medicaid enrollees – so the ties to the Gretchen Whitmer administration are present.
The connection between Meridian and the Whitmer administration is not well-publicized but the mention of Shery Cotton in this article is heartening.
Cotton is a major, major player in Democratic Party politics in Michigan.
Thanks for the article.
This type of scheme is nothing new.
I recall a situation where a County Prosecutor in Metro Detroit had a registered campaign election committee receive funds from a political action committee whose donors were primarily criminal defense attorneys. The ostensible purpose of the PAC was to prevent the embarrassment of a “tough on crime” elected prosecutor receiving copious sums of donations from those who defended accused criminals in court and have these defense counsel appear on campaign committee filing accessible to the public. You would have to do a little digging but you would soon find out who donated to the PAC who in turn donated to the campaign committee of the incumbent prosecutor.
“…………It has been 15 months since those criminal referrals were made to the Attorney General.
i find it hard to believe that the current Democratic Michigan Attorney General would do ANYTHING to vigorously pursue action against pro-Democratic interests. If it was the GOP engaged in the shenanigans that would likely be a different story.
Kristina Karamo and the Michigan GOP should be pounding the table over this issue instead of the fixation with the 2020 presidential election.
Kudos to Bob LaBrant for his efforts.
“Kristina Karamo and the Michigan GOP should be pounding the table over this issue instead of the fixation with the 2020 presidential election.”
I agree. But this only works if the media decides it is an important issue to the media. I remember when Ross Jones of Channel 7 in Detroit ran with a story on Justice Hathaway and her real estate shenanigans. If they don’t cover it, it will get as much coverage as Ms Karamo’s complaints over the 2020 election.
Yeah, take the GBI Strategies investigation and the Muskegon City Clerk uncovering questionable voter applications: AG Nessel punts and gives the case to the feds who have not prosecuted anyone in almost three years.
Where was the mainstream press on that controversy?
Asleep? The problem is the local papers are decimated and TV stations are reluctant to spend reporter time on a long-developing story when there are car accidents to cover.
Nice article, as usual, Bill. A good breakdown on the issue.
First of all, I am shocked, shocked I tell you, that there appears to be favoritism and double standards in the enforcement of our state’s election laws as it relates to “dark” money. And that those interest groups whose issues support the positions of the Democratic Party get preferential treatment than those who support positions of the Republican Party when it comes to campaign finance violations. But what else did we expect from Benson and Nessel? They have never shown any real interest in going after their political compadres.
This should be fodder for any investigative reporter from any TV station or newspaper that wishes to look at it. Also, this should be an issue for editorial pages of the newspapers that endorsed either Benson or Nessel. If they cannot find it in themselves to at least criticize these two on this, they should NEVER, EVER complain about “dark” money or campaign shenanigans again.
Bob LaBrant is sort of right on dark money, but we live in an age when “wrong-think” gets you in trouble. Just ask Brendan Eich. The efforts by Benson and Nessel seem intent on silencing those who oppose them. Unfortunately, Mr. LaBrant does not offer a real solution.
Should this ever get to court, the problem is any court cases will wind up before the MI Supreme Court. And if it does, will they look to guidance from the DC Circuit Court of Appeals on disparate treatment in 1st amendment case: Frederick Douglass Foundation v. District of Columbia and hold that Democrats and Republicans should be treated alike? Not holding my breath.
Double standard by the Attorney General? Yes!!!!
Look at other cases!
Michigan Attorney General Dana Nessel suffered a big legal loss today when the final three of the Whitmer kidnapping defendants were acquitted of all charges by an Antrim County Circuit Court jury.
The Genessee County water indictments against Governor Snyder and others were another example of questionable charges which resulted in failure for Nessel.
Nessel’s detractors will point to these criminal cases of examples of political grandstanding and undue partisanship.
Excellent article Bill. Rarely get to see the internal workings of Michigan politics like this.
Anyone waiting for AG Nessel to, “do the right thing”, needs to spend considerable time-out in the Red Wings’ penalty box. Anyone who believes she will, I want some of what they’re smokin’.
Any opposition would get more mileage concerning this corruption by educating the public by sending this information to a middle/right leaning newspaper (where can we find one of those in Michigan?). Or have you keep writing articles like this for your Ballenger Report.
Excellent detail and disclosure seldom seen on political issues in today’s media, well done Bill!
Thank You ,Sir, for Your investigative reporting . The late Drew Pearson, would be proud ! An informed Electorate is Our only means to expose and to attempt to bring justice to ” corrupt” political action . Will the 2024 campaign be a repeat of the policies enacted under cover of Covid19 ?? The end does not justify “the any means necessary” dogma of the far left Progressives . In 1948 Progressives ran as a third Party under Henry Wallace . And did poorly . In 2023 ,the “third party” of 1948 has evolved as the primary Progressive Party under the title of the ” Democratic Party” The Constitution and Our Free Enterprise system is in grave danger.
As others have said, Bill you have provided a thoroughgoing, masterful report, displaying the present consequences of one-party government in our state. A murmur of discontent from our go-along progressive media? Crickets.
Abortion rights and gun control are the hallmark legislative and electoral accomplishments of the Gretchen Whitmer administration and the Michigan Democratic Party.
The Michigan Democratic Party is no longer the party of FDR and JFK – rather it is the party of George McGovern.
The recent plea agreement between Democratic former Macomb County Prosecutor Eric Smith and Michigan Attorney General Dana Nessel where he received ONE DAY JAIL SENTENCE on charges he illegally diverted $600,000 in forfeiture funds is being derided by many as a sweetheat deal
Oakland County Circuit Judge Nanci Grant emphasized she was bound by the Smith-Nessel plea deal in imposing the light sentence.
Thousands of MSP man-hours went into investigating the corruption allegations and both a jury and judge were denied the opportunity to impose justice. Criminal charges were pending against Smith for 3-1/2 years.
Smith issued a cheerful public statement emphasizing some forfeiture funds were diverted to church activities and this was a good cause.Smith – now without an active law license – described his love for his new job in construction.
Democrats protecting Democrats?
I my opinion, Michigan Attorney General filed the charges against Macomb County Prosecutor Eric Smith in the forfeiture funds mismanagement to protect a fellow Democrat .
Rarely do you see criminal charges pending in a state court for over three years and Oakland County Circuit Judge Nanci Grant at one point scolded attorneys in the case saying she could have tried the case during the expansive time it took plea negotiations to transpire.
Judge Grant emphasized at sentencing that her hands were tied under the plea agreement from imposing a harsher sentence.
Another Macomb County official in an unrelated corruption case Clinton Township Trustee Dean Reynolds was sentenced to 17 years in prison by a federal judge. Kwame Kilpatrick received a 28-year sentence and served seven years. Eric Smith will keep a big chunk of his pension after making court-imposed restitution.
Ben Liston, Eric Smith’s deputy prosecutor, who became a cooperating government witness received a jail term of 60 days and hand to pay $16,000 in restitution as part of his plea agreement. Both Smith and Liston have been disbarred. Irony here is that Liston as a government informant receives a harsher penalty that his boss who was supposedly being targeted by the A.G.
Dana Nessel’s prosecution prevented GOP Macomb County Prosecutor Peter Lucido or the U.S. Attorney’s Office in Detroit from vigorously seeking charges against Smith over the diverted forfeiture monies.
Eric Smith smiled in 2020 during his filmed criminal arraignment – that was the only day he was in custody and constitutes the service of his one day sentence eventually imposed by Judge Grant.
Eric Smith smiled the day of his arraignment day of sentencing – and why not? The A.G.’s Office made sure that he received an oh-so-sweet plea deal.
Thanks for bring to light this example of campaign finance violations that are being enforced in a discriminatory manner.
We have seen the same type of political considerations that impacted the investigation of the Michigan GOP presidential electors. Consider these circumstances:
(1) the U.S. Department of Justice investigated and presented the same facts regarding these electors to a District of Columbia federal grand jury – who declined to issue any indictments;
(2) the Democratic Ingham County Prosecutor likewise investigated the matter and labeled the conduct of the electors as “a stunt” unworthy of a prosecution criminally;
(3) these charges are being filed some 3 1/2 years after the event;
(4) there obviously was no intent on the part of the electors to deceive the National Archives or the U.S. Congress that they were the electors certified by the Michigan Legislature and Michigan Secretary of State – which is needed to obtain a conviction of the electors under state law;
(5) the electors are almost all senior citizens who signed the certificate at issue in the case at the direction of others who were not charged with anything.
I fully expect that the electors to be vindicated by the court system – and in the unlikely event they would be convicted – the sentencing judge and appeals process would prevent any jail term from being imposed or conviction being upheld.
On the other hand, Nessel had substantial proofs of electoral misconduct in the Muskegon/GBI investigation that had been uncovered via State Police questioning. GBI had ties to Democratic Party insiders. The Michigan Department of Attorney General failed to bring charges in the matter and left the Biden administration U.S. Department of Justice to further probe the apparent electoral misconduct – and of course nothing has happened as far as any criminal charges.
Nessel’s actions regarding these two investigations lead to an ineluctable conclusion that partisan considerations dictated which investigations would result in criminal charges and which would not.
I have found it interesting the divisiveness that has been created by Dana Nessel’s positions in that it has started to alienate her own constituents.
Nessel had previously enjoyed the general support of the Yemeni-American community and their YAPAC political action committee, who had endorsed her in her 2018 and 2022 campaigns for Michigan Attorney General.
Enter her labeling the Hamtramck City Council ban on the Pride Flag on city property as a “national embarrassment”.
Hamtramck mayor Amer Ghalib, whose candidacy was funded by Democratic-leaning political action committees and who was invited with other City Council members to visit Joe Biden in the White House, suddenly appeared on a podcast with Tudor Dixon.
Mayor Ghalib later invited Trump confidante Michael Flynn to Hamtramck and Flynn showed up to speak to dozens of Yemeni-Americans at an event in that city.
Attorney General Nessel is causing deep divisions within her own party.